CHALLENGES TO HOMEOWNERSHIP: Predatory Lending and Other Homeowner Fraud

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CHALLENGES TO HOMEOWNERSHIPPredatory Lending
and Other Homeowner Fraud

• Housing Forum
• May 20, 2005

Stephen H. Olden Legal Aid Society of Greater
Cincinnati 215 E. Ninth Street, Suite
200 Cincinnati, OH 45202 (513)
241-9400 solden_at_lascinti.org
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New Buyers

• Predatory home purchase loans
• Hidden defects in home
• Sharp loan servicing practices

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Current Owners

• Predatory refinance loans
• Shoddy home repairs/remodeling
• Misunderstood reverse mortgages

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Outcomes for Homeowner

• Financial struggles/depleted savings
• Ruined credit
• Foreclosure/sheriff sale

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Outcomes for Neighborhood

• Foreclosures
• Investors/speculators in neighborhood
• Declining neighborhood

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Fair Housing Phenomenon

• Prime lenders and redlining
• Sub-prime lenders and reverse redlining

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Foreclosures Filed in Hamilton County
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Predatory Loans

• Sub-prime lender
• Appraiser
• Broker
• Title company
• Others?

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Warning Signs

• High interest rate
• High closing fees
• Balloon payment/adjustable payments
• Falsified loan application
• No real benefit to borrower
• Home repair scam
• Debt consolidations (often unsecured debt)

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Targeted Victims

• Elderly
• New, young
• Minorities

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Elderly

• High equity in homes
• Trusting, ripe for con artists
• View crime as physical and with weapons

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New, Young

• American Dream is appealing
• Lack financial knowledge

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Minorities

• Lack of access to credit channels
• Reverse redlining
• Discriminatory loan terms

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Home Purchases/Home Repairs

• Property flipping and ugly houses
• Investors
• Fly-by-night contractors

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Sharp Loan Servicing Practices

• Junk fees, charges
• Unaccounted-for payments
• Lapsed insurance
• Hasty foreclosures

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Misunderstood Reverse Mortgages

• Complexities
• Equity depletion
• Alternatives not explored

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Whats Being Done?

• Consumer education/counseling
• Industry clean-up
• Law enforcement
• Legislation
• Litigation

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Fountain Pen Predators

• Yes, as through this world Ive wandered
• Ive seen lots of funny men
• Some will rob you with a six-gun,
• And some with a fountain pen.
• And as through your life you travel,
• Yes, as through your life you roam,
• You wont never see an outlaw
• Drive a family from their home.
• Woody Guthrie
• Pretty Boy Floyd (1939)